What to expect from Costco's new deal with Visa and Citi

NEW YORK (AP) — If you're shopping at Costco, you'll need a new credit card to pay for those family-sized packs of chicken breasts or toilet paper.

After only accepting American Express the last 16 years, the retailer is switching to Visa and will use Citigroup as its exclusive provider of co-branded credit cards.

Costco is a large and influential chain. It is the world's second-largest retailer by revenue, and has 671 locations around the world, including 474 in the U.S. and Puerto Rico. For an annual fee of $55 to $110, shoppers get access to groceries in bulk sizes, as well as appliances, jewelry, home goods and other products.

The switch from AmEx to Visa could mean changes for some of those customers. Here are the things you need to know:

WHAT WILL CHANGE?

Costco will only accept Visa credit cards at its stores starting April 1, 2016. Customers will also be able to use Visa and MasterCard debit cards, or pay in cash. American Express credit cards will no longer be accepted on that date. That's a hit to AmEx. Last year, Costco accounted for 8 percent of American Express billed business, 10 percent of its cards in force and 20 percent of its worldwide loans.

Citigroup is also expected to take over the existing American Express Costco credit cards.

WILL I HAVE TO REAPPLY FOR A COSTCO CREDIT CARD?

Costco hasn't said yet whether people will have to reapply for its rewards credit card. Citigroup says it plans to make the transition from AmEx to the Citi's Visa card as "seamless" as possible.

Costco card holders probably won't need to reapply, industry experts say. However, a small number of Costco card holders won't be approved for a Citi card. American Express and Citi have different credit standards and a person who may have qualified under AmEx may not be approved under Citi. The people affected are likely to be small, however, since American Express' qualifications are some of the highest in the industry.

WHY DID COSTCO DO THIS?

When its agreement came up for renewal, AmEx and Costco were unable to reach a deal that both sides liked.

WHY ANNOUNCE THIS A YEAR AHEAD?

After the announcement last month that Costco was ending its relationship with American Express, "we wanted to reassure everyone that we had another deal in the works," says David Sherwood, director of finance and investor relations at Costco.

WILL THE CITI CARD OFFER SIMILAR REWARDS AS AMEX?

That is still to be determined, but industry experts say it is likely. As with the American Express card, the new Citi card will have no annual fee, Costco says. And like with AmEx, the new card will serve as a membership card.

With the Amex card, Costco customers get 3 percent cashback on fuel purchases, 2 percent back on restaurants and eligible travel and 1 percent cashback on all other purchases. The cashback comes in the form of a check issued every February. Customers can use the check for goods at a Costco checkout line, or redeem it at the customer service desk for actual cash.

The cashback program on the American Express card was good for Costco because customers would use their checks to buy more Costco goods. Citi also has a long history of issuing credit cards with cashback programs.